Nortel will not emerge from bankruptcy whole, CEO Mike Zafirovski confirmed in a video sent to company employees June 26.
“The sale of our businesses is the best path for Nortel to maximize value,” he says. “In my entire career, no news has been more tough to deliver than this news. Let me state the obvious: This is not where we wanted to be. The goal was the recreation of a great company.”
Nortel has endeavored to stabilize its business units since filing for bankruptcy protection Jan. 14 [VR 1/29/09]. Nokia Siemens Networks entered into a “stalking horse” sale agreement to buy Nortel’s CDMA business and LTE assets for $650 million, the companies announced June 19. The business lines will go to Nokia Siemens after court hearings in July unless another bidder submits a higher offer or creditors and suppliers are successful in their challenge to the deal.
Once all of the business units are sold and the remaining assets restructured, Nortel will be a small residual company that eventually will be “wound down,” Zafirovski explains. Nortel’s shares already have been delisted from trading on the Toronto Stock Exchange
Zafirovski says he expects the process of selling off more units to begin in the next several months.
But enterprise customers might not have to wait that long. Nortel was reportedly close to making a deal that would give Avaya its enterprise PBX division for $500 million. The companies were “near to signing the paperwork” as of Friday evening, Toronto’s The Globe and Mail quotes a source familiar with the situation as saying.
Avaya declined to comment for this article.
3 Potential Buyers for Enterprise Unit
Three bidders are vying for the enterprise businesses, reveals Joel Hackney, president of Nortel’s Enterprise Solutions division, in a conference call with enterprise unit employees June 22. Only one of them has technology that would overlap with Nortel’s enterprise telephony systems, he hints, saying the redundancy would strengthen both companies.
If Avaya is one of the bidders, Nortel customers should read up on the controversy surrounding Avaya’s maintenance policies [VR 9/25/08].
Besides Avaya, the Gores Group, which holds a 51% stake in Siemens Enterprise Communications, is among the parties frequently mentioned as eyeing Nortel for acquisition, says Stephen Leaden, president of telecom consulting firm Leaden Associates Inc., in Campbell Hall, N.Y., who has been following Nortel’s situation closely.
Siemens is now under the leadership of Mark Stone, Gores’ president of operations and former chairman of Siemens Enterprise’s board, following the departure of CEO James O’Neill, the company announced June 29. Spokeswoman Silvie Casanova declined to comment on the circumstances surrounding O’Neill’s move and Siemens’s intentions regarding Nortel.
Golden Gate Capital (which acquired contact center provider Aspect Software) is also at the center of acquisition buzz, Leaden says.
Expect Migration Incentives
Perhaps the best news for enterprise customers is Hackney’s assertion that all of the bidders are looking to buy Nortel’s enterprise unit intact, instead of cherry picking certain product lines.
Hackney says he expects the list of bidders would grow if Nortel were to enter into a stalking horse agreement for the enterprise business.
The Nortel name might live on post-sale, Zafirovski says in the video. The company is in discussions with possible buyers to pursue business in certain market segments under the Nortel brand.
Nortel products likely will continue in their current releases for the near term if the enterprise division is acquired, and any major update announcements could be delayed, Leaden says.
The purchaser will likely continue to support Nortel products for a while – at least until they’re folded into the acquirer’s own product line, Leaden predicts, but then Nortel users should expect to be tempted by migration incentives.
Times are tough for nearly all telecom equipment makers, reveals PBX market guru Allan Sulkin’s latest analysis. Line station shipments were down about 26% from the first to the second quarter of 2009 and 22% year over year. These are the bleakest shipment results he’s seen in 30 years.
Cisco, however, shipped more line stations than it did in the second quarter 2008, though it had the largest quarter-to-quarter decline among leading suppliers.
Meanwhile, Nortel is beating its first-quarter revenue, cash intake and customer performance metrics, Zafirovski reports in the video. (